Adding value to learning

Four drivers are changing the relationship between employer and employee and between the employer and its training requirements. The number and range of qualifications available; the speed of product development; the change in the way we manage our careers; and the changing nature of the financial institutions industry itself.

Historically, companies investing in extensive training of staff in the early years of their employment were rewarded with many years of loyal service. The cycle of investment and return on training and development initiatives was measured in decades.

Today, companies need to generate a return on this investment within two or three years to justify their investment. Companies - often market leaders - who have been most committed to recruiting, training, and developing talent for their firms have increasingly found themselves the targets of other firms in this industry who have paid a premium to hire away this talent after the investment has been made, but before a return has been earned.

Poaching

As a result, companies are investing less and less in long term training and there has been an accelerating trend of poaching rivals' employees to buy in the necessary skills.

The result of this reduced investment in the training and development of employees by employers has pushed the onus onto the individual to ensure that they continue to invest in their own training to acquire and maintain the necessary skills to be sought after by employers.

The Chartered Management Institute recently collected the views of over 1,800 UK managers. Despite the trends being observed in industry, the research found that the promise of professional and personal development has overtaken money matters as a key consideration for employees.

In fact, half of all managers surveyed who were under the age of 40 said they joined their current employer because of the development opportunities available. Despite this, the same survey finds that as many as 41% reported that their current organisation did not have a specific training and development budget.

It is paradoxical, then, that while employers are reducing their investment in employee learning and development, all available research shows that those companies which invest in their workforces have more committed employees who stay in these firms longer.

Oversimplifying a little, I believe that in striving for competitive advantage with clients and with the investment community, financial services businesses need to focus on two core drivers of success - adding more value to clients and customers and improving the efficiency of business processes.

Similar developments have occurred in personal lines insurance. Led by Direct Line more than 20 years ago, it used technology to drive down the cost of providing personal insurance, greatly increasing the business efficiency of the industry and created value for customers by offering the convenience of a telephone.

By contrast, the commercial insurance industry has been a poor adopter of technology and, more importantly, has been confused about what aspect of its business adds value to customers and what aspects are merely processes which need to be made more efficient.

Too often, the commercial insurance industry fails to differentiate between those activities which it performs which add value and those which are purely administrative.

Thus, brokers too often content themselves with sitting in between their clients and their markets and with being very busy on a number of activities without regard to the relative value of those activities.

When we, at Marsh, analyse the time spent by our brokers on their work, too much of it is taken up with the administrative functions of trying to agree wordings and policy amendments and chasing up the issuance of policies.

We need to understand that our clients regard it as surprising that we are unable to get policies issued at the inception of a risk contract and regard our subsequent efforts to get the policy issued as remediation rather than value added.

Fuller discussion

This reduces the time we allocate to strategic risk issues and undermines the willingness of chief executives and chief finance officers to engage with us in a fuller discussion of their risk management needs. We are too often perceived to be part of the risk rather than part of the management of the risk.

Therefore, our failure to execute basic processes well, reduces our credibility in front of our clients when we want to engage them in higher value risk management discussions.

We are supposed to spend our time on the areas where we add the greatest value. But in the commercial insurance industry, a disproportionate amount of time is spent on processes, confusing clients as to what the industry's real value proposition is. And because we spend so much time on the process, we ourselves have become confused about how we create value in our industry.

We believe that because we work enormously hard on the process, and because it takes a huge amount of our time, we must be adding value. And when we get to the end of the process we rather expect our clients to congratulate us for having delivered on this process.

But, we are often disappointed in their reaction and they are often disappointed in us. If we improve our business processes, we will also improve the perception of value which we add to our clients and customers.

So if it is right that in banking, insurance and other financial services activities the focus needs to be on adding value to customers and improving the efficiency of business processes, what are the implications for employers' decisions on investment in learning and qualifications?

In my view the same logic should apply. Employers should require employees to meet certain minimum standards with respect to the skills necessary to be part of the financial institutions profession. As an employee's roles and responsibilities change over time, so these minimum skills standards will change.

I argue that this level of training offers no source of real competitive advantage to the employer and should therefore be regarded as part of improving the efficiency of the business process.

The teaching of these minimum standards and qualifications should be outsourced and institutions like the Institute of Financial Services are well equipped to provide this education in an efficient and effective way.

When activities such as IT servicing, claims processing or dealing with customer enquiries are outsourced, they free-up the organisation to concentrate on and invest in developing a differentiated proposition for its customers and clients.

So too with the minimum standards and skills required of membership of the financial services industries: companies should devolve responsibility for these to employees and should outsource the teaching of these skills to third party providers.

A further reason why these basic skills are a commodity and should be viewed in the context of the efficiency of business processes, is that there is no shortage of these skills in the UK financial services sector in general and in London in particular.

The National Employee Skills Survey of 2003 which interviewed more than 70,000 businesses across the UK, found that in every aspect of its review of education and training the financial services sector outperformed other sectors of the British economy.

This research is supported by the Corporation of London whose 2005 survey concludes that: "it is difficult to avoid the conclusion that London and New York score so highly in global financial centres because of the quality of the workforce".

Today, we have a financial services industry with a demonstrated appetite for outsourcing its non-core processes to increase efficiencies; a regulatory body demanding that the basic framework for operating is understood, and that all participants are compliant; and employees for whom a good university degree is no longer sufficient in order to progress their careers and who have to keep developing their skills and achieving new qualifications.

If the drivers of value in financial services are adding value to clients and improving the efficiency of business processes, then these should be the drivers of learning and professional qualifications. For the individual, it will be the difference between passing exams, and getting an education.

It's important to make the distinction.

So, if minimum standards, basic skills and regulatory requirements are aspects of learning and qualifications which should be regarded as "business process" what are the aspects of learning and qualifications which should be regarded as value added?

In the business world, value added learning must be about creating the ability to adapt and to change. Businesses need constantly to re-invent themselves to survive and prosper; to keep their customers; to grow market share; and to deliver expected value to shareholders.

Successful companies rely on people at every level to learn quickly and apply what they learn in often unanticipated situations. Learning in the business environment is often less about taking in new information than it is about connecting with people who help put that information in context and suggest new ways of understanding it.

"The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn," says the writer and business philosopher Alvin Toffler.

Cross selling

In large, complex, global, multi-product financial institutions an important part of value-added learning comes from shared experience. It begins with cross selling the capabilities of the entire organisation but needs to develop into an ability to think laterally about the synergies which exist in bringing one specialist part of an organisation together with another.

These opportunities develop more quickly when people learn from one another.

Value-added (as opposed to basic) education and training cannot be outsourced.

It is part of how one firm will differentiate itself from another. The development of personal networks within an organisation becomes part of the culture of the organisation.

Companies that value learning outperform those that don't. The work force benefits far more if a culture of learning is embedded, rather than an enforced concept of learning that's attached to a tick-in-the-box style approach.

Firms that have fostered a culture of learning will be those that continue to innovate and deliver value, and they will use that culture to attract and retain the best talent.

What sort of training will there be in the next 10 years?

- Basic financial literacy across the UK is poor and we can expect greater interest in introducing financial literacy courses as part of the 14 to 19-year-old curriculum

- More and more school leavers will go on to further education. Those who do not will find it harder and harder to begin a career in financial services

- As the numbers engaged in undergraduate degrees increase, so the value of a first degree will diminish and the best and brightest will increasingly seek to study for a second qualification. This trend is in evidence with the increasing numbers sitting for accounting and legal qualifications and in the numbers applying to do MBAs. These postgraduate qualifications will be expanded by the addition of further specialist qualifications in specific areas of financial services

- As the numbers of these qualifications and courses expand, and as the demands of employers increase, responsibility for taking these qualifications will increasingly migrate from the employer to the employee, as part of the employee's need to show that he or she has the necessary qualifications to further his or her career

- Hand in hand with the previous point, we should expect to see the more basic skills training, which employers used to provide, being outsourced and discontinued by these employers

- We will expect to see the need for shorter, tailored learning programmes designed to accelerate knowledge of new products or learning of new skills.

These programmes will be sponsored by employers as part of their investment in differentiating their capabilities through innovation and product development.

- Employees who will expect to have six or more different employers in a career of 30 plus years, will increasingly be asked to evidence their personal investment in learning, re-learning and re-skilling alongside their job-related experiences and expertise, so that education will not be something that happens in the early stage of career development, but will be a continuous and contiguous part of career development at all stages.